Energy

3:03 pm

Mon February 13, 2012

Natural Gas Boom Energizing The Chemical Industry

A Shell-owned ethylene cracker plant on Pulau Bukom, Singapore. Several U.S. states are competing for a similar plant the company plans to build in northern Appalachia.

Courtesy of Shell Chemicals

Just outside of West Virginia's capital city, Charleston, on the banks of the Kanawha River, sits the Institute Industrial Park. Chemical plants have operated here continuously since World War II, when the local factories cranked out synthetic rubber. Today there are industrial pipes, tanks and buildings stretching in just about every direction.

Soon, there could be more.

U.S. chemical companies are the latest beneficiaries of the nation's natural gas drilling boom. Long focused on cheap gas sources elsewhere in the world, companies are now looking to expand here. A surplus of natural gas has pushed down prices, making it more attractive for chemical companies that use lots of gas to reopen shuttered plants and build new ones.

Sleepy rural communities across the country are turning into industrial zones — and that worries people who live nearby. But the boom is good news for manufacturers that need cheap, plentiful supplies of natural gas.

The natural gas drilling boom near Charleston has local business boosters lobbying for a huge new chemical plant, called an ethane cracker, which could bring jobs to the state.

"It will take approximately 2,000 construction workers two years just to build the facility," says Matthew Ballard, president and chief executive officer of the Charleston Area Alliance. "Once up and running, there will be several hundred jobs at that cracking facility."

The plant would "crack" ethane — break it down at the molecular level — and turn it into ethylene. Kevin DiGregorio, executive director of the Chemical Alliance Zone in Charleston, says ethylene is used to produce all sorts of things, from the cushions we sit on to the clothes we wear.

"Everything that's not wood, or maybe brick, is made with chemicals, certainly. But probably 40 to 60 percent of it is made from ethylene," DiGregorio says. "It's very, very important to our daily lives."

States Compete For Plants, Jobs

The Marcellus Shale, from which nearby drillers are pulling natural gas, is particularly ethane-rich. Most natural gas contains anywhere from 2 to 8 percent of ethane, DiGregorio says, but "Marcellus natural gas contains as much as 14 to 16 percent" of ethane.

Bayer CropScience, the company that operates the industrial park near Charleston, is talking with companies interested in building ethane crackers in the region. No official announcement has been made, but business leaders here are keeping their fingers crossed.

The same is true elsewhere around northern Appalachia. Ohio, Pennsylvania and West Virginia are competing to lure a new ethane cracker that the oil company Shell plans to build. Firms in Canada also see opportunity in the Marcellus Shale.

"We wouldn't have to go back very far — literally just seven or eight years — and the picture for the industry here in North America was pretty uncertain," says Randy Woelfel, CEO of NOVA Chemicals in Calgary, Alberta.

He says high oil prices sent a lot of petrochemical manufacturing overseas to the Middle East and Asia. But now, low natural gas prices and the ethane-rich Marcellus Shale have changed everything.

"That means ... that we'll be back in the hiring business, rather than the consolidation and survival/cost-cutting mode that NOVA was clearly in for much of the last decade," Woelfel says.

Environmental Groups Wary

As chemical companies in the U.S. look to expand, they can expect plenty of scrutiny from environmental groups, already concerned about pollution from natural gas drilling.

"Clearly there are advantages to having economic development and manufacturing occur here in the United States," says Mark Brownstein, head of the Energy Program at the Environmental Defense Fund. "Our biggest concern is that we not sacrifice public health and the environment to get those jobs."

Brownstein says for each new plant or expansion, tough questions will be asked about whether proposed facilities are being properly located and how they will affect local air quality.

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Transcript

ROBERT SIEGEL, HOST:

We've reported frequently on the boom in natural gas drilling and how cheap natural gas has become. Today, the benefit to the chemical industry. For a long time, it built its plants in countries where gas was cheaper. But now, chemical companies are looking to expand here.

NPR's Jeff Brady traveled to Charleston, West Virginia and sent this story.

(SOUNDBITE OF TRAIN)

JEFF BRADY, BYLINE: Just outside of West Virginia's capital city, Charleston, on the banks of the Kanawha River, sits the Institute Industrial Park. Chemical plants have operated here continuously since World War II, when synthetic rubber was produced. Today, there are industrial pipes, tanks and buildings in just about every direction. And soon, there could be more. The nearby natural gas drilling boom has local business boosters lobbying for a huge new chemical plant called an ethane-cracker.

Matthew Ballard heads the Charleston Area Alliance.

MATTHEW BALLARD: It will take approximately 2,000 construction workers two years just to build the facility. Once up and running, there will be several hundred jobs at that cracking facility.

BRADY: The plant would crack ethane, break it down at the molecular level and turn it into ethylene. Kevin DiGregorio, with the Chemical Alliance Zone, says ethylene is used to make all sorts of things.

KEVIN DIGREGORIO: Wherever your listeners happen to be sitting or driving right now, everything that's not wood or maybe brick is made with chemicals, certainly. But probably 40 to 60 percent of it is made from ethylene, including the cushions they're sitting on and the clothes that they're wearing. So, it's very, very important to our daily lives.

BRADY: And Marcellus Shale that drillers nearby are pulling natural gas from is rich in ethane, says DiGregorio.

DIGREGORIO: Most natural gas is going to contain maybe two to six, maybe upwards of 8 percent ethane in it. Marcellus natural gas contains as much as 14 to 16 percent ethane in it.

BRADY: Bayer CropScience, the company that operates the industrial park, is talking with companies interested in building ethane crackers in the region. No official announcement has come, but business leaders here are keeping their fingers crossed. The same is true elsewhere around northern Appalachia. A competition is underway between Ohio, Pennsylvania, and West Virginia to lure a new ethane cracker that Shell Oil Company plans to build.

Firms across the border in Canada also see opportunity in the Marcellus Shale. Randy Woelfel is CEO of NOVA Chemicals in Calgary.

RANDY WOELFEL: You know, if we would get in our time machine, I suppose, and we wouldn't have to go back very far - literally just, you know, seven or eight years - and the picture for the industry here in North America was pretty uncertain.

BRADY: Woelfel says high oil prices send a lot of petrochemical manufacturing overseas to the Middle East and Asia. But now, low natural gas prices and the ethane-rich Marcellus Shale have changed everything.

WOELFEL: That means for us that we'll be back in the hiring business, rather than the consolidation and survival, cost-cutting mode that NOVA was clearly in for much of the last decade.

BRADY: As chemical companies in the U.S. look to expand, they can expect plenty of scrutiny from environmental groups, already concerned about pollution from natural gas drilling. Mark Brownstein heads the energy program at the Environmental Defense Fund.

MARK BROWNSTEIN: Clearly, there are advantages to having economic development and manufacturing occur here in the United States. It's good for jobs. It's good for communities. Our biggest concern is that we not sacrifice public health and the environment to get those jobs.

BRADY: Brownstein says for each new plant or expansion, tough questions will be asked about whether proposed facilities are being properly located and how they will affect local air quality.

Jeff Brady, NPR News.

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